Democracy and Governance in Honduras
The Development Challenge: As President Ricardo Maduro's government enters its last year and new national elections loom in November 2005, the Government of Honduras (GOH) continues to face difficult challenges in its efforts to reduce poverty, eliminate corruption, strengthen democracy and decentralization, improve education and health, lower crime rates, and promote broad-based sustainable economic growth and investment. The Maduro Administration faced significant difficulties during 2004 in moving the government's transformation agenda forward. The transformation process continues to be impeded by a narrow economic base, concentrated ownership of assets, limited foreign and domestic investment, corruption, high population growth, low levels of education, and high levels of infectious disease. In addition, a weak judiciary demonstrates limited capability to protect civil and commercial rights or to cope with high crime rates and human rights violations. Other problems facing Honduras include 4.5 million people (64% of the population) living in poverty; an annual population growth rate of 2.6%; an infant mortality rate of 34 per 1,000; a high prevalence of HIV/AIDS (1.9% of the population and 50% of the reported AIDS cases in Central America); chronic undernourishment (one third of children under 5 years old), an average educational level of 5.3 years; and a continuous deterioration of water and forestry resources.
The World Bank estimates that Honduras' per capita gross national income in 2003 was approximately $970 and its external debt is expected to be around $4.8 billion (approximately 76% of gross domestic product) at the end of 2004. In February 2004, the GOH signed a new three-year Poverty Reduction and Growth Facility (PRGF) program with the International Monetary Fund (IMF). The continuation of this program is conditioned primarily on the GOH's ability to restrain government expenditures (primarily public sector wages), increase tax revenues, improve the solvency of the financial system, and prosecute corrupt government officials and private sector financial managers. With the signing of the IMF program, the GOH received $250 million from the IMF, the World Bank, the Inter-American Development Bank (IDB), and a number of bilateral donors. In addition, the GOH received debt relief on its debt service payment arrears from the Paris Club countries (including the United States). Assuming the GOH stays on track with the IMF program for one year, Honduras is expected to reach the Heavily Indebted Poor Country completion point in spring 2005, which would provide debt relief of approximately $564 million in net present value terms from the international donor community.
The GOH is making a significant effort to open its borders to free trade, as shown by its signing of the Central American Free Trade Agreement (CAFTA) in May 2004, and its ongoing active participation in negotiations for the Free Trade Agreement for the Americas (FTAA) and the Free Trade Agreement with Canada. The GOH anticipates that its Congress will ratify CAFTA in 2005. In recent years Honduras has also signed a number of other free trade agreements with Mexico, Chile, and the Dominican Republic. The GOH realizes that the country must increase its exports and attract new private investment to continue to grow and generate tax revenue to provide quality social services such as schools, hospitals, health clinics, water systems, electricity, roads, personal security, and a fair judicial system. To encourage greater private investment and competitiveness, the GOH has implemented a number of programs this year to increase exports in the areas of agro-industry, forestry and wood products, tourism, light manufacturing, telecommunications, and energy.
U.S. national interests in Honduras support: 1) greater investment and economic growth in Honduras to increase the number of potential customers for U.S. businesses; 2) U.S. exports of goods and services to Honduras to generate more jobs in the United States; 3) reducing the flow of illegal immigrants into the United States; 4) decreasing pressure for greater U.S. government law enforcement resources; 5) increasing citizen support for democracy; 6) consolidating the GOH civilian-controlled military, police, and legal institutions to help protect U.S. investments; 7) reducing the impact of international crime, terrorism, and illicit narcotics activities on the United States; and 8) limiting the spread of infectious diseases, especially tuberculosis and HIV/AIDS.
(Excerpted from the 2006 Congressional Budget Justification for Honduras)
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